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AS I SEE IT

Posted 2/11/14 (Tue)

By Neal A. ShipmanFarmer Editor

For the last three legislative sessions, oil-impacted counties have lobbied North Dakota Governor Jack Dalrymple and leaders of the North Dakota Legislature for a fairer return of the oil and gas revenues that are being poured into the state’s treasury. And at the conclusion of every session, these state leaders apologize that they haven’t done enough in directing the money back to where the impacts are being felt the most.
Part of the problem that local leaders have had in the past is that they just didn’t have enough data to present to the Legislature to clearly illustrate just how severe the impacts are in places like McKenzie, Mountrail, Williams and Dunn counties. Or in towns like Watford City, Stanley, Williston and Killdeer. Or how unfair the state’s current formula for sharing oil and gas revenues with the oil-producing counties is.
To be fair to the Governor and many of the state’s legislators, they have tried to put their arms around just how fast things are developing in the patch. But since they aren’t here, they really don’t have any comprehension of the demands that are being placed on our local governments on a day-to-day basis. Nor do they understand that as the oil industry continues to explode in this four-county region of North Dakota, the demands being placed on local government for everything from road repair, water and sewer lines, water towers, landfills, new city streets and lagoon systems is growing exponentially.
But in reality, what the Legislature is currently providing to the local governments in this region to meet the escalating demand is mere chump change in comparison to the huge amounts of oil and gas tax revenues these areas are generating.
Consider the facts.
McKenzie County, which leads North Dakota in oil and gas production, sends annually over $1 billion to the state treasury from the wells currently in production in the county. Yet, the county only gets back just under $80 million, or 6.8 percent, of those tax dollars that is then shared between the county, schools, cities and townships to take care of the needs.
While $80 million may seem like a lot of money, in the oil patch that sum of money doesn’t go very far. Remember the nine-day rain last June? It ended up costing the county $50 million to repair the 500 miles of road that were destroyed by the heavy oil traffic that relies on our county road system to get to and from well sites.
So what is the answer? According to Mark Haggerty, of Headwaters Economics in Bozeman, Mont., who looked at seven oil-producing states and compared how those other states share their oil and gas revenues with local government, the answer is quite simple. North Dakota needs to do a better job of getting the money back to the areas being most impacted.
In order for the major oil patch counties, like McKenzie, Mountrail, Williams and Dunn, to begin catching up their infrastructure needs, Haggerty believes that three items need to be addressed by the North Dakota Legislature.
First, and foremost, North Dakota needs to return more of the gross production and extraction taxes to the local government. Second, the state needs to revisit the allocation formula it uses; and third, the Legislature needs to create a regional savings vehicle to provide for revenue to the impacted areas after production falls.
You won’t hear anyone in McKenzie or Mountrail counties argue with what Haggerty is saying. After all, those two counties believe it or not, trail only the state of Texas in oil production in the United States. And there is not going to be a slowdown in drilling in these two counties for decades to come.
Yes, many areas of the state are seeing the impact of the state’s booming oil business. But it is important to point out that there is a huge difference between seeing economic impact created by the oil industry, while it is quite another story to be literally overrun by the demands of the oil industry.
The real impacts that are being felt the greatest are in the places where the oil wells are being drilled, where the man camps are being built, where the trucking companies and the related oilfield service companies are setting up shop. It’s where the tens of thousands of new jobs that have been created in North Dakota are at.
The real impacts are where thousands of trucks are driving daily on the roads that were built for a fraction of that number and where over 550 people visit our healthcare system’s emergency room monthly.
The real impacts are where a school system sees its enrollment seemingly double overnight and where communities don’t have the money to invest the hundreds of millions of dollars that it takes to build city streets, water and sewer lines and other infrastructure to meet the new commercial and residential growth.
The real impacts are in the communities when there isn’t a day that doesn’t go by that the volunteer fire department and the volunteer ambulance service aren’t being paged out multiple times to deal with automobile accidents and where you consider yourself lucky if you can find a one-bedroom apartment for rent for less than $2,000 a month.
The Legislature has had six years to try to get a handle on how it can best help meet the needs of places like McKenzie County and Watford City that are truly bearing the brunt of the oil boom that has brought so much wealth to the state. And so far they haven’t done a very good job of sharing the wealth with those being impacted the most.
Hopefully, this next legislative session, North Dakota will quit making apologies for not doing enough for those oil-impacted areas being effected the most.
We can’t wait much longer.